LEGAL ISSUES

Quiet Period Rules Revised

Good news! Appearing in Playboy is no longer out of the question.
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The quiet period is about to get a little bit noisier. On December 1, new rules will go into effect governing the public statements of CEOs on the eve of initial public offerings. The changes come after quiet period violations befell the founders of Salesforce.com and Google prior to their 2004 IPOs. Established as part of the Securities Act of 1933, the quiet period was intended to prevent companies from hyping their stock before investors had access to complete financial information. But the rules were always a little vague and enforced irregularly. Some critics argued that CEOs cited quiet period rules in order to dodge tough questions.

Then, last year, the SEC admonished Google's Sergey Brin and Larry Page for granting an interview to Playboy. Regulators forced Google to attach a copy of the article to its prospectus to clarify a few numbers and remind potential investors of certain risks. Meanwhile, Salesforce.com was forced to postpone its offering for 30 days after the SEC discovered CEO Marc Benioff had talked to The New York Times. (Both IPOs were extremely well received.)

Under the new rules, pre-IPO companies will be able to provide basic information to the media, meaning that neither of last year's controversies would have happened.

Last updated: Oct 1, 2005

DARREN DAHL

Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.




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